The outlook for American pharmaceutical products in Lebanon is unclear.
As Lebanon rebuilds after a long period of civil strife, pharmaceutical
piracy has not yet become a major feature of the economy, as it is in
neighboring Jordan and Syria. And there is new hope that the Government
may implement WTO/TRIPS patent protection by year 2000.

Indeed, Lebanon is poised to go in either of two directions: toward
a safe and quality pharmaceutical market where innovative, patented
products and legitimate generic copies can co-exist and provide doctors
and patients with an array of therapeutic options; or, one in which
the healthcare market may be overrun by poor quality pirated copies.
In the latter scenario, both the patient population and the economy
will suffer as international research-based companies refrain from various
forms of investment, technology transfer, training and other value-added
activities, as such investments will provide benefits to pirating companies
rather than the originator.

Recent reports continue to support market intelligence that Jordanian
and Syrian pirate companies are aggressively pressuring Lebanese health
authorities to register unauthorized copies of internationally patented
pharmaceuticals. American companies are especially concerned about the
recent registration of 2-3 generic companies, well known regionally
for their pirating activities. As was predicted in previous PhRMA NTE
submissions, several pirate products are known to be under active regulatory
consideration. Moreover, in December 1997, a well-known Jordanian generics
company launched a pirate version of a U.S.-patented product, a worldwide
top-selling antibiotic. The introduction of this pirate Jordanian product
can only be interpreted as an ominous sign for American companies, and
a retreat from Ministry of Health assurances to U.S. officials. The
pirate introduction comes despite MOH assurances to the U.S. Ambassador
that measures would be undertaken to prevent pirate product registration.

The assurances to the U.S. Ambassador are the latest developments
in an effort to obtain de facto, if not de jure, patent
protection. U.S. and European research pharmaceutical companies and
local licensed manufacturers have urged senior Ministry of Health (MOH)
officials to deny registration to dozens of poor quality, unauthorized
copies in the Registration Committee backlog.

Despite receiving assurances that "the Government of Lebanon
supports intellectual property rights," there is no tangible indication
that MOH regulations have been issued to block registration of infringing
products, nor is there any indication that the Government of Lebanon
is moving to amend the antiquated patent regime.

There also is a new government bureau in place (the Bureau National
des Medicaments) which confirms that one of its goals is the expanded
penetration of "generic" products in the market -- a potentially
worrisome policy in a market that does not offer protection to patented
U.S. products. While PhRMA does not object to the registration of legitimate
generics, we are concerned that pirated products may be registered under
this new policy.

More encouragingly, the Ministry of Economy has approved a new draft
patent law that offers product patent protection for pharmaceuticals.
This represents a significant step forward. It is reported that the
draft law has been referred to various ministries for comment, and there
is hope that the draft patent law will be submitted without significant
changes to the Cabinet by the end of 1998. Should the Cabinet submit
the draft law to Parliament, there is a good possibility that the new
law could be approved and implemented by the year 2000. The passage
of this law, however, will require substantial diplomatic and industry
support.

Other Trade Issues

In the past year, there has been a substantial rise in the parallel
importation of pharmaceuticals. The importation of these products as
a "cost containment" measure represents a violation of patent
rights, and due to porous supply chains outside the manufacturer's control,
poses serious health and safety concerns because counterfeit products
may enter the country via parallel trade.

A serious trade barrier concerns public sector procurement. The Government
procurement policy discriminates against foreign suppliers by allowing
local manufacturers a 15% price advantage in Government business. This
discriminatory practice contributes to higher costs for public sector
procurement -- ironic considering Government efforts at cost containment
-- and represents an added burden on taxpayers. It is also widely acknowledged
that locally produced products have "priority standing" over
imported products in Ministry of Health registration procedures, which
translates into shorter waiting periods for obtaining marketing authorization.

Potential Exports/Foreign Sales

Lebanon represents one of the fastest growing pharmaceutical markets
in the Middle East, and there is significant market support for innovative,
branded pharmaceuticals. However, as the market is still rebuilding
following the civil war, it is not possible to estimate the potential
growth in U.S. exports or sales.

There is considerable risk that without sustained pressure to upgrade
the existing patent law, Lebanon could go the way of Syria or Jordan
-- with sales losses to American companies in the tens of millions and
risk to manufacturing investments.

Outlook

Lebanon is considered a PhRMA priority country in the Middle East
region. In recent years, American companies have been investing in Lebanon
and growing rapidly, displacing European competitors. The future is
unclear however, as Jordanian, Syrian and other companies are pushing
for greater market penetration, including pirate versions of top-selling
products. The Government has not taken any tangible action to prevent
this, and is in fact facilitating pharmaceutical piracy by registering
pirate products and encouraging generic use. There is no Government
promise that tangible action will be taken soon to prevent further losses.
After two years of monitoring the situation, the time has come for more
intensive action.